Much has been written about social entrepreneurship; ventures in which an explicit goal is the betterment of society. However, far less attention has been applied to entrepreneurial philanthropy, in which a startup mindset and accountability is applied to issuing non-profit grants.

Intrigued by the concept, I was turned onto one of the leaders in this emerging field of philanthropy, A Better Chicago (ABC), by friend and ABC Board Member, Brent Rasmussen.

ABC is applying entrepreneurial principles to the art of charity. Even the organization's lexicon reinforces its startup mindset. It performs "due diligence" before it makes "investments" and it measures results as a "return on its investment."

Like a venture capitalist, ABC's involvement does not end when a grant check is cashed. Rather, the organization provides ongoing support of its "portfolio," including strategic planning, recruitment of Board members and public relations expertise. ABC has even created an incubator-style program in which startup non-profits compete for $100,000 in seed funding.

The criteria by which they evaluate potential portfolio non-profits are taken directly from a for-profit investor's playbook:

ABC's approach is refreshing, but not altogether shocking. The convergence of startup principles and the world of philanthropy makes total sense. Grants made solely on the veracity of a cause, without adequate attention paid to the recipient's ability to execute, are doomed to failure. Our fantastically inefficient Federal Government could learn a great deal from the folks at ABC.

ABC's Founder And CEO Speaks Out

In order to learn more about ABC's innovative approach, I sought out Liam Krehbiel, the organization's Founder and CEO.I was honored when Liam graciously agreed to connect and share his insights, which are excerpted below in italics.

JG: Liam, thanks for taking the time to chat with me today. I am curious as to A Better Chicago's origin and how the organization differs from traditional non-profits.

"My pleasure John, thank you for helping us spread the word about our program. I founded A Better Chicago because I want to create a more impactful way to move the needle for low-income Chicagoans. Our country is starting rethink charity and philanthropy, and I wanted to do something that would accelerate that transformation in my hometown. We have some amazing nonprofits in Chicago, but most of them are well below their potential. A Better Chicago helps the most promising programs to scale up to really make a difference.

We differentiate ourselves in four ways. First, we think and act like investors. We have a rigorous screening process, and we only fund the very best programs that are able to quantify their impact. Second, our “investment” in a nonprofit goes well beyond just dollars. We build partnerships with top-notch companies like Accenture, Bain & Company, CareerBuilder and Latham & Watkins that provide pro bono advisory services to our portfolio organizations. Third, we go out of our way to ensure that our donors have a very clear understanding of how their donations are getting invested and making a difference. And finally, our board and leadership council cover all of our operating expenses, so 100% of all donations to A Better Chicago go directly to our grantees."

JG: I love it! In many ways, you act as a venture capital firm, with returns measured in impact, rather than profits. What are the key factors you look when assessing to fund a non-profit?

"Yes, our approach is similar to what you’d see from a venture capital firm. We want to make a catalytic investment in a high potential organization that will help them to achieve great things. The main difference is that we aspire to maximize our social impact rather than achieve a financial return.

When we are considering an organization for investment, we ask ourselves four basic questions. First, does the program produce transformational outcomes for its participants? Second, do we think the leadership has what it takes to build a strong, successful organization? Third, is the organization on solid ground financially and operationally? And fourth, do we think this model is scalable? All of these areas are important, but we’ve learned that leadership is the single most important consideration. Without the right leadership, nothing else matters."

JG: Tell us a bit about Project Impact and 2014's focus on innovation. What is Project Impact all about and why did you feel the need to create a contest in addition to your grant process?

"We launched Project Impact because we wanted to spur innovation in Chicago. Our core fund is focused on taking a model that has a solid track record and then helping them to get to the next level. However, we were concerned that we weren’t seeing enough innovative startups as we’d like that could grow into our portfolio. Project Impact is our answer to that. It’s an open competition that awards $100,000 and a year of management support to the most promising early stage nonprofit that is helping low-income Chicagoans to rise out of poverty.

We kicked off Project Impact and 2012, and we’ve been thrilled by the response. Last year, we had 60 applicants, which got narrowed down to four finalists that pitched a live audience of 300 people and a panel of judges, who selected the winner. The audience loved it because they get to ask questions and help select the winner. We’re planning to kick of this year’s competition later this spring."

JG: How do you judge your success and to what extent have you met your goals?

"In the near term, we measure our success through the lens of our grantees. If they are meeting their objectives, then we are being successful. Bigger picture, though, it’s about moving the needle for low-income Chicagoans. We want to be about more than just building great programs. We want to be about solving problems for our society. Time will tell if we are successful at that.

We’re learning about all sorts of innovative models through Project Impact. Some are using technology in creative ways to customize and enhance the educational experience for students. We’ve also observed an increased focus on social-emotional learning and STEM related efforts."

JG: You have clearly come up with a compelling way to make an impact at a local level. Are there any plans to replicate your success in other regions?

"This winter has been brutal, so I’m thinking pretty hard about launching A Better Miami! Kidding aside, the fact is there are over 1.2 million people living in poverty in the Chicago region. That’s an enormous number, and it keeps me focused on addressing the challenges in our back yard. That said, our organization is part of a broader effort that is building in our country to rethink philanthropy. Other examples are the Robin Hood Foundation in New York and the Tipping Point Community in San Francisco. They were critical to helping us get up and running, and I’d love to see more cities adopt this model in the future."

JG: How can folks help your efforts? Are you looking for in-kind donations, money and/or volunteers?

"The most important thing is that we want people to get engaged. That could mean making a donation, following us online, volunteering or just spreading the word. Our model is fueled by extreme generosity of time, talent and money. We welcome all forms of help to make a difference."

Follow my startup-oriented Twitter feed here:@johngreathouse. I'll never tweet about non-profits that can't scale or that killer burrito I am about to devour - just startup stuff.

John Greathouse is a Partner at Rincon Venture Partners, a venture capital firm investing in early stage, web-based businesses. Previously, John co-founded RevUpNet, a performance-based online marketing agency sold to Coull. During the prior twenty years, he held senior executive positions with several successful startups, spearheading transactions that generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara's Faculty where he teaches several entrepreneurial courses.

Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.

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